Tax code change

noclaf

In Feb of this this year I received a tax code letter from HMRC advising my code will change from 1250L to 1238L for April '19 to April '20. This was also reflected in my payslips since April.
I received a revised letter which is a reversal so for April '19 to '20 is now 1250L.
Assuming I am now due a refund for the additional tax taken from April '19 to Sep/Oct '19 how is this usually returned, do they make an adjustment on my next payslip e.g: add an extra £50 if that was the amount deducted or do they spread the refund over the remaining months of the financial year?

nick74

Your tax should be adjusted in full the next time you are paid under the new 1250L code. That is assuming however that is a normal cumulative code, not a an 'X' suffix M1/W1?

noclaf

Based on the letter it appears to be a standard 1250L code and the personal allowance is stated as £12,500.00. I do not see any other suffix letters mentioned

nick74

In that case your tax will be adjusted next time your are paid, for the full overpayment from April to date.

noclaf

Thanks Nick!

unholyangel

I'd also highlight the difference is your marginal rate of tax x £10 per month.

So if you're a 20% payer, thats £2 per month or if you're a 40% payer then £4 per month.

noclaf

Just as an update, my employer has updated the tax code for my Nov pay to 1250L and my net pay has increased by £16.20.
Now to the bit I need some help to understand: For 6 months from April to September I was paid using tax code 1238L. The HMRC adjustment notice I received shows that tax code 1250L is applicable from April 2019 onwards.

So does the £16.20 increase on my Nov pay represent all of the previous 6 months of tax overpayment being returned or do I need to follow up separately with either HMRC or my employer on this?

Dazed_and_confused

Your tax code allowances have increased from £12,389 to £12,509, an increase of £120.

This will save a basic rate taxpayer £24.

Assuming your recent payslip is for tax month 8 (period from 6 November to 5 December) then you are due 8/12ths of the £24.

£24 x 8/12ths = £16. There is an element of rounding with employers payroll calculations hence the extra £0.20.

Expect to see a reduction of £2 each payday for the rest of the tax year (when compared to your month 7 pay, not month 8).

Not sure where your reference to 6 months comes into play here?

noclaf

Regarding the 6 month ref: For my April to September payslips 1238L was used as the tax code. HMRC's notification states that the revised tax code of 1250L is applicable from April 2019 onwards. So I am trying to understand how my employer will now reflect the tax code change for April to September because based on the HMRC notification I've been overtaxed for those 6 months unless I am confused on how this works and it's completely possible lol.
I am a higher rate tax payer if that makes a difference here.

Dazed_and_confused

They won't/can't reflect the change for the period from April to September.

As the code is being used on a cumulative basis then the change will be for the period from April till the new tax code is operated.

You are trying to work out a situation that doesn't exist.

And you might want to post your payslip details (ignore the National Insurance elements) as the tax reduction suggest you are a basic rate taxpayer not a higher rate one (at least as far as this job is concerned so far this tax year).

noclaf

Dazed_and_confused wrote: »

Expect to see a reduction of £2 each payday for the rest of the tax year (when compared to your month 7 pay, not month 8).

What's the reason/basis for the £2 reduction?

My annual income puts me into the 'higher rate' band...it's quite clear cut unless something is amiss here on my understanding but I work for one employer and it's all PAYE.

My tax code for personal allowance was previously adjusted due to interest earned on cash in the bank....given how interest rates have dropped over the last year or two and lower interest received I assume this has brought me back within the threshold for higher rate tax payers...£500 I think it was.